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Fresh Look: Tire Industry Analysis by Yokohama’s New COO, Jeff Barna

SANTA ANA, CA (July 6, 2017) – The U.S. tire market is arguably the toughest in the world. That’s why Yokohama Tire Corporation (YTC) hired veteran auto aftermarket executive Jeff Barna as COO. Here, Barna candidly offers his thoughts on the tire market, as well as his new company.

Question: You’ve been with Yokohama since January. What are some of your main observations regarding the company and its strengths?

Jeff Barna: Yokohama’s a historic company – we’re celebrating our 100-year anniversary, indicative of a tremendous foundation of products and people. You don’t stay in business 100 years without having an adaptive ability to adjust to changing environments and changing times. I’m impressed by that. Yokohama’s an iconic brand that’s built a reputation of trust and reliability over the years.

While its originating roots are clearly embedded in Japanese soil, the brand has played an important role on American automotive culture. We have a tremendous portfolio of blue-chip customers who express their loyalty everyday by selling our products to their end customers. I was pleasantly surprised by the depth of these partnerships and the mutual trust built over the years.

As far as strengths go, number one is people and culture. We have people who have been with us for over 25 years and are still contributing to the progress of the company, and we’ve also welcomed new people who are injecting new ideas and energy. It’s a healthy blend of some old and some new.

Next is quality – not just of the company itself, but the quality of our products. From an assortment standpoint, this is key. We’re a broad-liner manufacturer. We have an impressive range of products that hit just about every segment and category. What’s nice is that we rarely have to say no to our customers.

Finally, it’s value. YTC has done a great job in terms of competitively positioning products in the marketplace that help our customers grow their businesses by offering new revenue streams and attracting new end-customers and consumers.

Question: What are some of your major goals for Yokohama?

Barna: Growth is a primary objective and YTC has asked me to provide leadership in that respect. We want to hit our numbers for growing sales and revenue, and show Japan we can be an even bigger contributor to the company’s global success. Plus, we want to seize the opportunity we have with new products in the consumer LTR and UHPT, commercial UWB and OTR mining segments.

In addition to growing, we want to do it in the most responsible fashion possible. I intend to emphasize a profit-centric mindset along with an ROI sensibility.

To support our focus on growth, my goals always include strategies and philosophies on how to elevate the company’s culture.

The foundation here is strong, but we have the opportunity to build a company where people never want to leave, and create a reputation as a destination employer where we have no choice but to turn away people who want to work here. That’s how you employ the best and the brightest and, ultimately, that’s the best type of market differentiator a company can have.

My top initiative is meeting our potential. If Yokohama Tire we can meet its potential in the U.S., that will transcend any of the goals that I have in mind for market share capture, profitability, sales growth, etc. If I can walk away from Yokohama knowing that we met our immense potential, I’d be highly satisfied.

Question: What’s been the reaction from dealers since you came on board?

Barna: To be fair, you should ask them. So far, they’ve been very welcoming…and I am still meeting some of them, listening to their thoughts on the market, their challenges and what they need from us to help them succeed.

We share a commonality. They recognize that while I haven’t been in the tire business too long, I know many of the industry’s players through my experience in the auto parts business. It’s encouraging to hear all the positive things dealers say about Yokohama’s tires and staff.

I’ve moved into new industries before and the initial reaction is that you’re somewhat of an unusual circus act. People are curious and want to know your background, guiding principles and management style. Above all, they want to know what you intend to change. That’s a natural reaction, so it’s important to be patient and as transparent as possible. Having a strong background in sales, I’ve come to realize that one never really gets a second chance at a first impression.

When meeting a distributor or dealer for the first time, it’s important to be overly prepared and conscious of where we stand with them as a partner. I enjoy thinking on my feet and being a problem-solver, so initial customer meetings are about as good as it gets. The fact that I have a passion for being intimately engaged with customers and understanding the details of their business will help set me and YTC apart from our competitors. I call it “Care Factor” and everyone working for me must exude this every day.

Question: Yokohama’s launched several new tires in all categories, including the highly anticipated GEOLANDAR M/T G003™ mud terrain tire. Which segment presents the best opportunities for YTC?

Barna: It’s good news across the board and we like all our children… I mean tires equally. We’re investing heavily in the Light Truck segment (LTR), with our immediate focus on the mud terrain line. The new M/T G003 is especially exciting because it’s been a long time in development and has turned out to be a game-changer. Once we build out that line by the end of 2018, we’ll have one of the most comprehensive light truck offerings in our industry.

We also have a renewed commitment to the ultra-high-performance segment of our business. It’s one of the original successes Yokohama had in the U.S., and I consider it to be one of our foundational product categories. It’s encouraging to see the investments that are going into rebuilding our equity in that important segment of the market.

In Medium Truck tires for commercial trucks (TBS), our new plant in West Point, Mississippi, is still increasing production every month. There’s a ton of potential there and the quality is absolutely superb.

With Off-the Road (OTR) tires for the heavy equipment, construction and mining industries, we have the best sales organization and best leadership team in the industry, including Bruce Besancon, who was brought over from ATG.

Question: Will Yokohama debut more tires this year and 2018?

Barna: This year was a watershed year for new products from YTC, and that momentum is going to carry well into 2018. One of my priorities is to ensure product vibrancy by getting more scientific about the age of our range by employing a vitality index. It’s something that’ll give us visibility on how new products are performing versus ones that are getting a little long in the tooth. It’s a simple process of knowing when to develop new versus when to update existing models. I’ve had success with this new product development methodology in the past. We’re also refreshing our GTSN Grand Touring segment passenger car offerings for introduction in early 2018. We think these will be a big hit with our customers.

Question: What industry trends do you see and how has the rise in raw material prices affected your strategy?

Barna: Regardless of trends, people always revert to value. There are trends that are influenced by the economy and new car sales, technology, i.e., selling on the Internet, female buyers, millennials, etc. However, the one transcendent answer is to provide value. This means not only visualizing trends but translating them into solutions for customers.

The one trend that stands out most is the effect technology and the Internet will have on buyer behaviors in the future. Since we’ve elected to not compete with our customers by selling direct to consumers, we need to better partner in ways that help them thrive as the market shifts. Co-developing strategies to elevate their presence on the Internet and then supporting them with dynamic supply chain capabilities will be imperative.

In regards to raw materials, it’s been about five years since this industry has experienced a measurable uptick in raw material costs, so I’d say that everyone is reasonably inexperienced on how to handle this. I find it exciting, but believe the manufacturing community has done a poor job in articulating the impacts. Everyone has some work to do here.

Question: What challenges do you see facing the U.S. tire industry?

Barna: The three primary challenges I see are how the industry’s going about right-sizing capacity, how we’re managing supply chain and overall spending. Starting with right-sizing of capacity, it’s a dynamic manufacturing landscape. There are huge investments in brick-and-mortar manufacturing on U.S. soil. During the next three to five years, we’re going to learn a lot about supply and demand, and forecasting to a relatively mature market with new in-region manufacturing. Announcements come every week on multi-hundred million dollar commitments and it’s very exciting, but there’s a lot of unknown.

In respect to supply chain, I’ve been blown away by some of the worst fill-rates I’ve ever seen in any industry. I think it’s embarrassing and admit that as a result we are not achieving our potential in some segments. This is an industry that has the capability to be a lot better in order to serve our customers and their needs in the future, especially as they aspire to better manage working capital in respect to deployed inventory. There’s a tremendous amount of work to be done here.

Finally, I’m not convinced that a company needs to spend $200 million a year in TV advertising to achieve growth in this market. I’m concerned there really isn’t any evidence to substantiate the level of spending you see today. It would be great to see my company on TV every night, but a lot of what I see resembles a keeping up with the Jones’ mentality. I’d rather redirect our spending on grassroots marketing approaches that drive dealer loyalty and pull-through. We intend to calibrate very closely to where our customers ask us to invest to help them create traffic in their service bays.

Question: How is the Alliance Tire Group being integrated within Yokohama?

Barna: The integration keeps moving along. Communication between the two organizations is key, and I’ve had several meetings with Alliance Tire Americas’ President Jim Clark and his team. And, as mentioned, ATG’s Bruce Besancon is now with Yokohama.

For now, YTC’s decided to run Alliance autonomously and focus only on isolated market-related synergies. Yokohama shares some incredibly strong customers that overlap with ATG within our OTR and commercial markets. We are now exploring customer programming enhancements to help increase loyalty, but from a brick-and-mortar standpoint, the companies will run independent of each other for the foreseeable future. We expect more close collaboration in the future, but we are not married to a timeline.

Question: From shock absorbers to car batteries, you have a lot of aftermarket sales and management experience. How will that help you with Yokohama sales, marketing and product planning?

Barna: It helps from a credibility and trust standpoint with customers that I’ve spent most of my adult life selling into channels that are synonymous with tires. As I’ve told several customers, being around the wheel well and reconnecting with installers who have supported products from companies in my past makes me very comfortable. I have sold to many of the same customers, the same kind of independent dealer and large chains alike. The terminology maybe be slightly different and the number of SKUs much larger, but the fundamentals of good products sold by good sales people to good dealers and all making good profit is universal.

With respect to marketing and product development, it comes down to knowing the market as best as one can, processing trends and listening intently to what consumers are asking for. I confess that I’m still learning about tread designs, compounds, plies and other vitally important product features, so it’s smarter for me to rely on our sales, marketing and product development teams in Santa Ana to make the right call on what to prioritize. I’m impressed with our people and encouraged we are driving the right agenda here.

Question: Yokohama’s branching out in nontraditional sport sponsorships, such as U.S. Youth Soccer, Nitro Circus and Spartan Races. What’s the thought behind these sponsorships?

Barna: While not overreaching its scope, each campaign can be activated down to the local markets and personally touch the consumer. Awareness is the goal, but it also gives us the opportunity to direct our customer efforts toward key markets that will matter more in the future, like the female purchasing population and millennials. I have a bias for local or micro-campaigns. I can’t tell you how many times a customer, when relating to another tire company’s TV ad said, ‘I’m not sure if that’s doing anything to drive sales through my business, but when we activate locally with Yokohama, we see a noticeable uptick in tire sales as a direct result of those campaigns.’

We’re not taking a shotgun approach – it’s a rifle approach. We look at our business case in each segment. Chelsea FC, which just won the English Premier League title – is a global sponsorship with some legs in the U.S., but US Youth Soccer is a large, grassroots organization for serious youth players. They – the drivers of tomorrow and their parents – know Chelsea better than they know Yokohama right now, but that will soon change.

Spartan is the largest obstacle course race brand and the people who enter Spartan races are like our GEOLANDAR tires – strong, tough, determined to go farther and faster regardless of the obstacles they face. Nitro Circus is a perfect way to reach an age group that may not otherwise see our message in other forms of media or sports sponsorships.

We are being very selective with our targets and expect to make big gains whether it’s Spartan racing or Porsche racing. Speaking of Porsche racing, we are in our ninth year in the U.S. and added Canada last year. The drivers say they know they can trust the tires to enable them to push their personal limits.

Lastly we are returning to off-road racing with a generous contingency program in SCORE and more news to come later this year.

Question: What’s the latest news on your new R&D Center in North Carolina?

Barna: The Charlotte facility is an important strategic investment that’s up and running, but in temporary quarters. From a people standpoint, we are building our competency with a solid foundation of proven, experienced Yokohama engineers, while simultaneously attracting brilliant, local talent. No announcements yet on a permanent home or products. When developments occur that will translate into winning solutions for our customers, we’ll share them.

Question: How has Yokohama Tire Manufacturing Mississippi (YTMM) been progressing?

Barna: Like the new R&D Center, YTMM represents the ultimate vote of confidence for YTC in the future. I’ve been to the plant recently and was blown away by the state-of-the-art machinery and attention to detail. The plant itself is a marvel of science.

As a result, our customers are being treated to what we believe is one of, if not the highest, quality manufactured tires in the market. YTMM is exclusively focused on TBS tires for the time being. We are ramping up our demand capacity in the U.S., so there’s still a good bit of toggling between offshore sourcing from other Yokohama plants versus the current output of YTMM.

In situations like ramping up production of a new plant, there’s always the temptation to rush the process, which is never a good idea. At YTC, we prefer to get it right as the benefits of longer-term outweigh being hasty. I like how deliberate we are being and know that customer satisfaction and confidence are the ultimate goals. That’s our focus.

Question: Sounds like you’re excited about Yokohama’s future in the U.S.

Barna: Totally! Whether strategic investments in new products, manufacturing, operations in mainland USA, a U.S.-based R&D center or dynamic grassroots marketing campaigns, I’m convinced we’re putting ourselves in a prime position to maintain and grow our relationships with the best customers in the world. I’m excited and fortunate to have joined the company when I have. I will do my part to ensure we keep our eye on the prize, delivering high-quality tires with the utmost in value to our distributor/dealer partners.

About Yokohama Tire Corporation

Yokohama Tire Corporation is the North American manufacturing and marketing arm of Tokyo, Japan-based The Yokohama Rubber Co., Ltd., a global manufacturing and sales company of premium tires that’s celebrating its 100th anniversary in 2017. Servicing an extensive sales network throughout the U.S., Yokohama Tire Corporation is a leader in technology and innovation. The company’s complete product line includes tires for high-performance, light truck, passenger car, commercial truck and bus, and off-the-road mining and construction applications. For more information on Yokohama’s broad product line, visit www.yokohamatire.com.

Yokohama is a strong supporter of the tire care and safety guidelines established by the Rubber Manufacturers Association and the National Highway Transportation and Safety Administration. Details can be found at the “Tire Care & Safety” section at www.yokohamatire.com.